Walgreens to Close Significant Number of Stores in Continued Erosion of Pharmacy Landscape
“Retail pharmacy is central to our future and to our overall customer and patient experience. It enables many other things, but it has to change,” said Walgreens CEO Tim Wentworth.
Facing a confluence of challenges, Walgreens has announced plans to close a substantial number of stores. The decision comes after years of declining profits and reflects similar moves by competitors like CVS and Rite Aid, painting a concerning picture for the future of pharmacies nationwide.
Walgreens signage at night / Bruno Coelho - stock.adobe.com
What's the Issue?
In efforts to salvage the struggling chain, Walgreens will close a significant number of its more than 8000 locations in the United States.1 Although a final number hasn’t been released, CEO Tim Wentworth told The Wall Street Journal that as many as 25% of its stores that aren’t profitable, located closely to each other, or struggling with theft, are vulnerable.2 The move is anticipated to take place over the next 3 years, and additional closures will be considered if performance doesn’t improve.
The chains’ struggles are multi-faceted, largely brought on by the increasing cost of living and aftershock of the COVID-19 pandemic.
Although Walgreens dramatically cut prices on more than 1000 products in May, representatives from the company said in a call that the decision was only impacting its profitability. Neil Saunders, managing director of GlobalData, attributed front-of-store struggles, which led to a decrease of 4% in retail sales in the most recent quarter, to “the cost-of-living crisis which has seen customers curtailing the volume of products they buy and shopping around more for the best deals and bargains.”1
And while COVID-19 vaccines boosted revenue during the pandemic, vaccination rates for multiple conditions have since fallen nationwide. Low reimbursement rates on prescription drugs have brought in smaller revenue, and competition from Amazon’s growing pharmacy business has only impacted business further.1
Why it Matters
- Walgreens’ planned closures add to a trend seen with other major drugstore chains. In recent years, CVS has closed nearly 900 stores,3 and Rite Aid, which filed for bankruptcy in 2023, has closed over 100 stores.4
- Pharmacy closures create pharmacy deserts, or areas where most people live more than 2 miles away from the nearest pharmacy. This lack of access, accompanied by longer travel times and distances, may contribute to nonadherence, poorer health outcomes, and increased care costs from hospitalizations or emergency department visits.
- Pharmacy deserts disproportionately impact Black, Latino, and minority communities. Following previous Walgreens closures in 2022, US Representative Ayanna Pressley (D-Massachusetts) and US Senators Ed Markey (D-Massachusetts) and Elizabeth Warren (D-Massachusetts) wrote to Wentworth, “these closures are occurring within the larger legacy of historic racial and economic discrimination that has created significant pharmacy and food deserts and lack of access to transportation in these neighborhoods.”5
Expert Commentary
- “Retail pharmacy is central to our future and to our overall customer and patient experience. It enables many other things, but it has to change,” said Wentworth in an earnings call with analysts.2
- “We are at a point where the current pharmacy model is not sustainable and the challenges in our operating environment require we approach the market differently,” said Wentworth during the same call.6
- “We continue to face a difficult operating environment, including persistent pressures on the US consumer and the impact of recent marketplace dynamics which have eroded pharmacy margins,” said Wentworth in a press release.1 “Our results and outlook reflect these headwinds.”
In-Depth Insights
- Walgreens and other pharmacies often lose money selling brand name drugs due to agreements with pharmacy benefit managers (PBMs). These groups, who serve as middlemen between health plans and drug manufacturers, negotiate prices with drug companies and set reimbursement rates for pharmacies. A New York Times investigation found that rather than reduce drug costs for Americans, PBMs often “steer patients toward pricier drugs, charge steep markups on what would otherwise be inexpensive medicines and extract billions of dollars in hidden fees.”7
- Poor working conditions and increased workloads have led some pharmacists to stage walkouts, further exacerbating the pharmacy landscape, in recent years. In October 2023, as many as 4500 pharmacists staged a 3-day movement coined “Pharmageddon.”8
- According to a survey by the National Community Pharmacists Association (NCPA), 32% of community pharmacists are considering closing in 2024 due to industry struggles.“Nearly a third of independent pharmacy owners may close their stores this year under pressure from plunging prescription reimbursements by big insurance plans and their PBMS,” said Douglas Hoey, PharmD, MBA, CEO of the NCPA.9 “This is an emergency. And if Congress fails to act again, thousands of local pharmacies could be closed within months and millions of patients could be stranded without a pharmacy.
Extra Reading
- Walgreens will close a significant number of US stores, shutting down unprofitable locations (CNN Business)
- Walgreens to shutter many stores as profits tumble (The Washington Post)
- The opaque industry secretly inflating prices for prescription drugs (New York Times)
READ MORE: Law and Advocacy Resource Center
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